Payroll at a dispensary

 

Despite federal regulations, the North American cannabis industry is growing due to state legalization efforts and the increasing acceptance of medical and recreational cannabis use. According to the 2024 Vangst Jobs Report, “440,445 full-time equivalent jobs are supported by legal cannabis in the U.S.” Of the job sectors within the industry, retail jobs such as budtenders and store managers, comprise 23% of those jobs, second to cultivation at 31%. Regardless of this blooming industry, however, with competing federal and state laws, cannabis business owners can still find it challenging to pay their employees. 

Paying employees with cash

Although not recommended, it’s common to see dispensaries pay their employees in cash. With limiting access to traditional banks and financial institutions this method, while an option, leaves dispensary owners vulnerable to many risks. When dispensaries pay employees in cash:

• You could be responsible for paying fines and penalties as these “under-the-table” methods could be considered illegal if you’re not complying with employment laws. 
• Labor laws and tax laws must still be met. If employees are paid in cash, managing payroll deductions and employment taxes becomes infinitely more difficult. Without proper record keeping you’re unlikely to meet compliant payroll processes potentially failing an IRS Audit should one occur.
• You compromise the safety of your business and employees. Keeping large amounts of cash on-site increases opportunities for theft.  

How about independent contractors?

An alternative option to cash payments is hiring workers as 1099 employees. Workers as independent contractors are responsible for paying their own taxes, deducting their benefit elections, and processing their tax filings. However, while it might seem like the perfect alternative, illegally misclassifying employees as 1099 employees could subject you to hefty fines. This is because dispensary employees might not meet the proper criteria to be classified as contractors, creating further tax and legal issues for cannabis companies. It limits workers from accessing certain benefits and creates a restrictive work environment, therefore you’ll need to do heavy research to see if this is a viable option to begin with. 

Using payroll software

As an employer, you are legally required to pay your portion of employment taxes, file quarterly payroll returns, and withhold taxes from employee wages. The simplest way to do this is with payroll software. Cannabis dispensaries can provide regularly scheduled paychecks, keep proper time tracking, and easily pay taxes. By working with reliable vendors, you can streamline your payroll management and ensure regulatory compliance, easily! 

Struggling to develop a strong payroll practice? Read our payroll best practices. 

Choosing the right payroll solution

Paying your employees doesn’t have to be troublesome. There are just a few things you’ll want to keep in mind when vetting a payroll provider. 

Looking for a payroll solution created for cannabis? Look no further.

Compliance

Due to ever-changing regulatory requirements, dispensaries face stricter oversight compared to non-cannabis industries, such as adherence to the IRS 280E tax code. This tax code prohibits cannabis dispensaries from claiming standard business deductions for expenses related to the sale of marijuana like employee wages. As a result, these limitations directly influence how dispensaries calculate their payroll taxes, adding an extra layer of complexity. When evaluating providers, clarify how they address dispensary payroll and taxation. 

Reliability

Reliable partners play a critical role in financial management for any business. While there are still many challenges in the cannabis industry, having access to dependable banking services and a stable bank account is essential. Without a reliable provider, your business would have a difficult time ensuring smooth operations and minimizing risk, especially in uncertain times. Experienced vendors tailored to your industry who have faced similar challenges before could provide the expertise and guidance needed to move forward with confidence.

Scalable

The best cannabis companies likely want to grow, and finding a scalable payroll solution is key to achieving that. It’s important to have a system that can adjust to your changing needs, especially when it comes to how businesses pay employees. Your compensation package may change, you might add additional benefit offerings, and a flexible payroll system ensures compliance while simplifying these calculations as you scale.

Integrates with the rest of your HR processes

Paying your employees is just one facet of managing your workforce. When you need to file important documents, having quick links to access employee records and payroll information can save valuable time.  An integrated payroll solution connects all HR tasks creating a streamlined workflow and reducing the risk of errors.

Payroll software specifically for the cannabis industry

Wurk is an industry-specific, leading all-in-one human capital management solution. We provide services beyond just cannabis payroll that manage your entire employee lifecycle, from hire to retire! As marijuana remains illegal on a federal level, partnering with our industry experts gets access to compliant resources and trusted banking solutions. 

Ready to simplify your payroll and HR processes? Contact us today to discover how Wurk can help your cannabis business thrive